Moorepark Technology Limited Financial Statements 2001.

Mr. J. Flanagan (Director, Teagasc), Mr. W. Donnelly (Director, Moorepark Technology Limited) and Mr. J. Beecher (Assistant Secretary, Department of Agriculture and Food) called and examined.

We are dealing with the 2001 financial statements for Teagasc and Moorepark Technology Limited. I welcome members and witnesses. Witnesses should be aware that they do not enjoy absolute privilege and should be apprised as follows. As and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons identified in the course of the committee's proceedings. These include the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the committee. Persons invited to appear before the committee are made aware of these rights, and any persons identified in the course of proceedings who are not present may have to be made aware of these rights and provided with the transcript of the relevant part of the proceedings that the committee considers appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House, or an official, either by name, or in such a way as to make him or her identifiable. Members are also reminded that under Standing Order 156, the committee should refrain from inquiring into the merits of a policy or policies of the Government, or a Minister of the Government, or the merits of the objectives of such policy or policies.

I welcome Mr. Flanagan, director of Teagasc, and ask him to introduce his officials.

Mr. Jim Flanagan

Thank you, Chairman. I am accompanied by Mr. Denis Bates, head of finance, and Mr. Liam Donnelly, head of our dairy products research centre in Moorepark. I am also accompanied by Mr. Brian Mangan, finance officer, Moorepark Technology Limited.

Will Mr. Beecher, please, introduce his official?

Mr. Jim Beecher

I am accompanied by Mr. Michael Kelly, assistant principal officer.

I now ask the Comptroller and Auditor General to comment on the financial statements.

Mr. John Purcell

Teagasc was formed in 1988 through an amalgamation of ACOT and An Foras Taluntais with the aim of providing services for the agriculture and food sectors in three distinct areas - research, advisory services and training. It is a nationwide organisation with local, county and regional offices, agricultural colleges, research stations and laboratories and a national headquarters in Dublin. Its activities are mostly financed by way of grants from the Exchequer which are supplemented by the income generated from its operations in the form of advisory fees and so on. Up to a few years ago, it obtained significant EU grant aid which has almost petered out with the slack being taken up by the Exchequer.

The scale of its operations can be gauged from the accounts for 2001 which showed it had an income of €135 million, current expenditure of €128 million and capital expenditure of €12 million. In recent years it has been finding it difficult to live within its financial allocation and has received additional State grants to reduce its deficits. However, given the slowdown in the economy, the scope for additional funding in the semi-State sector has been severely curtailed. In order to operate viably in this new environment, Teagasc has embarked on a rationalisation programme that involves the closure of certain centres and the disposal of a number of premises, including its headquarters building in Sandymount.

To return to the accounts, members will note that pension and other superannuation payments amounted to almost €17 million in 2001, net of staff contributions. This cost is increasing all the time and does not include accrued liabilities, the reason I draw attention to the position in my audit report.

The audit of the 2002 accounts is being finalised. My information is that the pensions liability has been actuarilly computed at €582 million at the end of 2002. On a micro level, this gives an indication of the scale of the public sector pensions time bomb we discussed last week. I expect to issue the audit report on the 2002 accounts within the next few weeks.

Moorepark Technology Limited is a company in which Teagasc holds 51% of the authorised share capital. The remainder of the shareholding is held by a number of companies in the dairy and general food industry. The company operates from Teagasc premises at Moorepark, Fermoy. I audit its accounts and have given it a clear audit report for 2001.

Perhaps Mr. Flanagan will now make an opening statement.

Mr. Flanagan

Representatives of Teagasc are pleased to appear as witnesses to be examined before the Committee of Public Accounts and answer questions related to its financial statements for 2001 and any related matters.

Teagasc employs more than 1,500 personnel as research scientists, agricultural advisers, teachers and administrative support staff. Research services are delivered by about 200 scientists at nine main research centres covering food processing, food safety, dairying, beef, sheep, arable crops, horticulture, environmental protection, economics and rural development. Advice and services for farmers and rural dwellers are provided by approximately 550 local advisers and regional specialists operating from about 100 centres. Training for young entrants, adult farmers, rural dwellers and those involved in the food industry is provided by approximately 200 teachers and technologists at colleges, local training centres and research centres.

The year 2001 will be remembered for the major outbreak of foot and mouth disease in Britain, the emergence of BSE on mainland Europe and the events of 11 September in the United States. Teagasc played its part in the national emergency campaign to prevent the spread of foot and mouth disease and in providing professional assistance for the agri-food sector in coping with the restrictions. The emergency led to a necessary curtailment of some research, advisory and training services for a lengthy period during 2001 but the adoption of information technology and innovative systems of communications minimised the impact on our work.

Teagasc met all of its statutory obligations in 2001. Total expenditure amounted to €128.7 million, excluding capital, of which €109 million was provided by the State. The balance was generated by fees charged for services, from farming activities and EU sources. Pay and pensions account for approximately 70% of total expenditure.

Does Mr. Donnelly wish to make an opening statement?

Mr. William Donnelly

In 2001 Moorepark Technology Limited traded profitably. Total turnover amounted to €831,000, up from €813,000 in 2000. The retained profit for the year amounted to €27,300 compared to €10,702 in the previous year. The mission of the company does not require it to pursue maximum profitability but to provide a stable financial base for discharging its mission to stimulate and facilitate innovation and development in the food industry. The bank balance at the end of 2001 was €312,000 as per the balance sheet.

I have a question for Mr. Flanagan. A study undertaken by Professor Gerry Boyle, NUI, Maynooth, has found that the return on investment in agricultural research in Ireland over the last 30 years, 47% on average over the last seven years, has been almost ten times the level advocated by the Department of Finance for public sector investment projects - 5%. Does this research not confirm that Teagasc senior management is taking a very short-sighted approach to the resolution of its current expenditure difficulties in closing down research centres in Ballinamore and Knockbeg which have formed an integral part of research projects?

Mr. Flanagan

It is true that Professor Boyle examined a number of selected samples of expenditure programmes which showed a considerable return on investment. Teagasc has been faced with a reduction in State grants, which means it must operate with a smaller budget. This means, in turn, that it cannot maintain the size of its current programmes unless it can attract funding from other sources. It has been attempting to get the farming sector to contribute more towards the agricultural production research programme but has not been very successful to date. We try to get as much research funding as possible from the European Union and other sources to enable us to increase our programmes. However, it is difficult to get significant extra money for production research, in particular. Teagasc has no alternative other than to try to concentrate its research resources on the larger and more efficient centres where there is critical mass. It is not in a position to maintain all of its locations for research or even advisory services at a time when its budget and State support is contracting. It would like to maintain services and increase the research it carries out. However, it cannot do so if it does not have the resources to deliver.

Will you, please, outline the commercial criteria for research and development projects? I understand Teagasc research centres give approval to proceed. Are the criteria based solely on commercial considerations?

Mr. Flanagan

It depends on the research area involved. Food research is largely externally funded through funding measures in which we follow the criteria set by the funding agency. Some of this research concerns food processing. The major criteria set by funders are contribution to job creation and economic activity and innovation in the food industry. Another area - this is in the public good - concerns food safety and consumer concerns. In such cases the criterion would be economic activity but only in so far as it is driven by consumer acceptance and the wish to have food quality assurance.

On agricultural production, while research is related to the competitiveness of the commercial agriculture sector, we also have a significant environmental research programme which is more in the realm of the public good. There is an element of economic activity and competitiveness but only in so far as we have respect for the environment and develop systems of production which are sustainable in the longer term. It is a mixture of public good and commercial considerations.

Did the Ballinamore research centre not form an integral part of the Teagasc regional research project?

Mr. Flanagan

Teagasc has a dairy research programme led by the main dairy research centre in Moorepark. Ballinamore was one of the centres which formed part of the programme.

Was the research project not of national importance?

Mr. Flanagan

When we had sufficient resources, Teagasc was able to operate a number of research farms. When our resources contracted, we had to make decisions as to which farms contributed most to the national research programme. Teagasc adjudged that the farm in Ballinamore was of lesser importance than a number of others. It was the one we initially said should be closed because it contributed less than others to the programme.

Can the potential yield from the sale, estimated at €500,000, be justified in terms of denuding the county of State-owned agricultural infrastructure for the west? This is a research centre not only for County Leitrim but also for the entire western seaboard.

Mr. Flanagan

Teagasc considers it a national programme. We do not feel obliged to have a facility in every county.

That is not what I am saying. The Ballinamore centre is unique in that it is located in an area which is not only wet, like Kilmaley, but also where there is a particular type of grass. It offers huge potential for research and development in the west.

Mr. Flanagan

Teagasc has decided that the farm associated with the college in Ballyhaise will be maintained. It has to be maintained as part of the teaching function and is also located in an area where there is wet drumlin soil. We have developed it as part of our research activity. It is now used for research, teaching and demonstration purposes. The view is that, combined with Kilmaley, there is sufficient emphasis on dairying on the wetter, more difficult soils.

Is the organisation aware that the research carried out has implications in the north-west which covers 12 counties and that similar research cannot be carried out in any of the other existing facilities?

Mr. Flanagan

The view is that the research being carried out at Ballyhaise on a soil type and in a climate very similar to that found in the drumlin impeded drainage belt across counties Leitrim and Cavan will adequately meet the needs of development in dairying on the more difficult, wetter soils.

Can Teagasc justify the return of €500,000 in closing down this huge facility in the north-west?

Mr. Flanagan

The view is that the capital value is not the primary reason for closing it down.

What is the reason?

Mr. Flanagan

Teagasc has to operate with a smaller budget, which means that our research programmes and the number of places from which we operate have to be reduced. As mentioned by the Comptroller and Auditor General in his introductory statement, Teagasc has been forced to come up with a development plan which visualises it operating from fewer centres to reduce its cost base. The research facility at Ballinamore is the one which is contributing less than others and we have made a decision that it is the centre which will be closed. It is the logical and obvious one to close.

There will be a lease back arrangement on headquarters which is also for sale. What value for money will Teagasc receive on this arrangement?

Mr. Flanagan

Headquarters is being sold unconditionally. There will be no requirement for a lease back arrangement. As Teagasc must have a location from which to operate while providing alternative accommodation in existing centres, we may be looking for a short-term lease back arrangement at headquarters. However, that will not be a requirement in the sale.

Are you stating categorically that there will be no lease back arrangement with the purchaser of headquarters in Dublin?

Mr. Flanagan

I am stating categorically that a lease back arrangement will not be mentioned as a condition of sale.

That does not answer the question. Excluding the conditions of sale, following negotiation of the sale, is there agreement, in principle, that there will be a lease back arrangement?

Mr. Flanagan

Teagasc will need a place from which its Dublin staff can work between now and next summer when alternative arrangements will be in place. We may well talk to the purchaser of headquarters about a short-term lease back arrangement.

I put it to you that serious negotiations are taking place on a long-term lease back arrangement once the deal has been concluded. It would be an investment for a developer to buy the property and lease it back following the sale.

Mr. Flanagan

I am not aware that any question of a lease back arrangement has been discussed with a potential purchaser. That has not happened. Teagasc has decided that after the sale has been completed, if it suits both it and the purchaser, it may talk about a lease back arrangement but this has not been discussed with any potential purchaser as a possibility. The decision is to sell without conditions.

You are not saying the possibility of a future lease back arrangement has been excluded.

Mr. Flanagan

I am saying explicitly that a short-term lease back arrangement may be placed on the agenda in discussions with the purchaser.

My point is that for financial gain or equity the Teagasc board decided to sell an asset. To do a deal on a lease back arrangement on considerably higher rent would be false economy and a juggling of the books.

This is intense for Mr. Flanagan. A number of serious questions arise from what the Chairman said, of which one relates to the sale of property. Teagasc headquarters is being sold without conditions attached. However, it is said that if it suits both parties, a lease arrangement could be made when the sale is concluded. Before I go into this, I have another question. Is it normal for Teagasc to follow Government policy in regard to the regions?

Mr. Flanagan

Yes. Teagasc is a State agency which follows Government policy in so far as resources allow. It is our policy to do so.

I have no compunctions, good, bad or indifferent, about the sale of Teagasc headquarters as I never could understand the reason Teagasc was located in Dublin, given the rural nature of the organisation. When considering and looking at divesting itself of certain properties and costs, did the Teagasc board not consider that perhaps moving to a place like Ballinamore would be a far better option as it would keep that centre open and bring a fresh impetus of employment to enhance the research being undertaken? Would that not have been better than this mealy-mouthed arrangement?

I cannot accept that Teagasc can say it is selling headquarters without conditions and in the next breath tell the committee that if it suits both parties, it will enter into an arrangement. What about the staff to be redeployed? Do we need the same headquarters building back again? Is Teagasc not selling the property on the basis that it wants to realise an asset? It is certainly not selling it in order to enter into a cosy arrangement afterwards to occupy the same building from which it is supposed to be transferring staff to another location. How many members of staff, including Mr.Flanagan, have indicated that they are willing to transfer from Dublin to the proposed location? What negotiations were conducted with staff in regard to this decision and how comfortable are human resources and relations in regard to it?

Mr. Flanagan

The suggestion that Teagasc might be entering into a cosy relationship, or that this is not a planned activity is not true.

Teagasc has not stated it will not lease the premises back after it is sold. Is that correct?

Mr. Flanagan

No, Teagasc has a plan——

Does Deputy O'Keeffe wish to put a question?

Is the committee being told that if Teagasc sells this property, it will not lease it back?

Mr. Flanagan

If I could be allowed——

It is a simple question requiring a simple answer.

Mr. Flanagan

I have answered it.

Not to my satisfaction.

Mr. Flanagan

Teagasc has a short-term need. The board, when faced with a financial deficit, came up with a plan to bridge it. Part of the rationalisation plan was to sell the headquarters building and relocate to other Teagasc centres. There are two groups of staff at headquarters. The administrative staff comprises about 70 people. The other group comprises the rural economy research centre and national farm survey staff, about 30 in total.

Teagasc considered a number of possible places where staff might be relocated within an existing centre. However, it decided in its wisdom, having looked at a number of options, to relocate the headquarters administrative staff to Carlow to be located in Oak Park House, the main building on the Oak Park Estate, a research centre. It decided to relocate the rural economy research centre staff to the Athenry centre in part of the old Mellowes College building which was being closed down.

In both locations there are staff. In Carlow there are research staff and research laboratories in Oak Park House from which they should be removed because it is not appropriate to have them there for a number of reasons. We are in the course of planning to relocate staff and laboratories and facilities in Oak Park House in order to make provision for suitable accommodation for a headquarters. That process will not be finished and the new area not fully available until late spring next year. Similarly, in Athenry we have to refurbish part of the Mellowes College building to make facilities available for the rural economy research centre staff which will not be available until spring next year, possibly in April, May or June.

Some of the staff at headquarters will not want to relocate to either centre. Current policy in the public service is that where staff in Dublin do not volunteer or wish to relocate, we cannot send them screaming to a new location. There will be a need to accommodate staff in Dublin in the intermediate term.

What percentage of staff have indicated they do not wish to transfer?

Mr. Flanagan

About 10% have indicated a wish to transfer. A number of other staff have not given an answer because they want to be told all the possibilities such as whether they will have options for travel or get compensation if they move. There are a number of questions they want answered before they will give a definite answer. Some have not given an answer because they——

The facts of the matter are that out of 100, ten have said "Yes" and 90 have said "No".

Mr. Flanagan

No, 90 have not said "No". They have said they are not in a position to give an answer until they get complete information about the offer.

Teagasc needs to accommodate most of the staff until spring next year. For this intermediate period we can and will ask the potential purchaser if we can reach an agreement to stay in the building until May or June next year. It is this lease-back for a relatively short period about which we are talking. Teagasc plans, come April, May or June next year, to have alternative accommodation in existing facilities for all the staff, whether they transfer from Dublin. It is in that limited way we will agree to a lease-back.

I have no problem with that answer. It is a sensible way to proceed. However, I cannot understand the reason it was so difficult to get that answer. Certainly, the Chairman did not get it. The simple fact is that Teagasc is not ready to change, until spring 2004. Therefore, it will sell headquarters and look for an option to stay with the staff.

Has agreement been reached on the potential lease cost per square foot? How many square feet does Teagasc occupy?

Mr. Flanagan

We have not entered negotiations and do not plan to enter them——

Has Teagasc any estimation of the cost? It must have some concept of what it would cost per square foot.

Mr. Flanagan

There are reasonably standard rental costs. We will not necessarily do this but will look at alternative options for the short-term lease of accommodation in other places. Following good tendering practice we hope to negotiate the best value for Teagasc. If the purchaser is willing to lease back at a rate which is not the best available, Teagasc may well look at alternatives for the short-term lease of accommodation to meet its needs in Dublin.

Could you have moved the staff almost immediately to other centres without having to incur building and major restructuring costs to accommodate staff redeployment?

Mr. Flanagan

Teagasc has no vacant facility which would accommodate the staff from Dublin.

It strikes me that the cost of building or leasing accommodation in a place like Ballinamore would be much lower.

The biggest financial issue has been outlined by the Comptroller and Auditor General. Pensions have cost Teagasc €17 million, net of staff contributions. The Comptroller and Auditor General stated that by the end of 2002 the actuarial cost of pensions would be €582 million. In terms of good management and housekeeping, what provisions have been made? When did you become aware that pensions would become a millstone around your neck? How does Teagasc propose to deal with this matter? What is the level of staff turnover in terms of early retirement as against natural wastage?

Mr. Flanagan

Provision for pensions is made from current expenditure. Teagasc is no better or worse than other bodies. We pay pensions out of current income which includes the State subvention and pension contributions from staff. We do not have a funded scheme reserve. We recently received an estimate that our accrued pension liabilities were of the order of €580 million - the liabilities Teagasc would have if it was closed down tomorrow. It does not have the freedom to solve this problem within its own decision-making powers because it is an agency. We are governed in financial matters by various Departments. The fees charged for our advisory services are subject to approval by two Departments. This is a matter for the public service more than Teagasc. Its authority cannot decide in its own right.

What number of staff take early retirement as against natural wastage? Is this becoming a serious problem?

Mr. Flanagan

I cannot give the Deputy accurate figures but Teagasc has approximately 1,600 staff, most of whom work up to or close to retirement age. Mr. Bates may be able to describe the situation.

Mr. Denis Bates

We are an aged outfit at this stage. It is true to say that in the next couple of years the number who will retire will be significant. If we do not replace them——

What is the percentage?

Mr. Bates

I am sorry to say I do not have the figure as a percentage but it will be significant. Many staff are in the 55 to 65 year age group. Because of our budgetary situation we will be forced into a situation where we will not be able to replace staff. We will probably have to reduce staff numbers in the coming years - this is a very rough guess - by at least 200 out of a complement of 1,600.

Mr. Flanagan

In the last 12 months about 50 permanent staff members have left due to retirement or other reasons. The loss is about 50 per year.

Do you regard this as a big problem? It looks as if there will be many leaving at the same time if there are many in the 55 to 65 year age group. Does the Comptroller and Auditor General have any comment to make on the matter?

Mr. Purcell

As Mr. Flanagan said, it is not a problem particular to Teagasc. In any organisation where the age profile is of a certain nature, this problem will arise sooner rather than later. As we discussed last week with Mr. Geaney, when discussing the national pensions reserve fund, it has been coming down the road for some time.

In an effort to get a handle on the potential cost of these liabilities across the public sector and industry generally, the accounting bodies introduced Financial Reporting Standard 17 which forces organisations to identify the costs and ultimately make provision for them in their accounts on an ongoing basis. As an interim arrangement, they have to carry out this exercise which shows in stark terms that there is, as I mentioned in my opening remarks, a pensions time bomb. If FRS 17 has done nothing else, it has alerted us to the scale of the problem. In the case of an organisation with an age profile like that in Teagasc, it will be worse than others in the short-term.

Mr. Flanagan, what is the amount paid on the land bank leased by Teagasc? You stated at the Joint Committee on Agriculture and Food that you leased property in Ballydague. How many acres do you lease?

Mr. Flanagan

Some 95 hectares.

Will you, please, convert that to acres for me?

Mr. Flanagan

Approximately 240 acres.

At what cost? I knew you would have the figures for us today because you did not have them on the last occasion at the meeting of the Joint Committee on Agriculture and Food.

Mr. Flanagan

About €112,000, I think.

How many acres are leased from Golden Vale and at what cost?

Mr. Flanagan

We have not leased any land from Golden Vale.

Sorry, I mean Dairygold. I am speaking from memory.

Mr. Flanagan

We have rented 95 hectares from Dairygold at a similar cost, €119,000.

Have you rented land from Glanbia?

Mr. Flanagan

We have rented 53 hectares from Tipperary Co-op, Solohead Farm.

Mr. Flanagan

Some €25,000.

Mr. Flanagan

Does the Deputy want a list? We have leased 20 hectares of land adjacent to Curtin's farm in Moorepark from a local farmer.

Mr. Flanagan

Some €15,000. We have leased 31 hectares at Flagstaff, silage ground, from the Minister for Defence at a cost of €4,800.

He is generous.

Mr. Flanagan

We have rented from, I think, the local diocese Knockbeg Farm near Carlow - 36 hectares - for sheep research.

Mr. Flanagan

Some €15,000. We have leased a large mountain sheep farm in County Mayo close to Leenane comprising 273 hectares.

Mr. Flanagan

Some €18,000.

What is the total cost of leasing land and what area does it cover?

Mr. Flanagan

The total leased is 675 hectares at a total cost of €340,000.

What is your total milk quota?

Mr. Flanagan

Teagasc operates a milk quota of 1,503,000 gallons.

Are many small farmers wondering about the reason Teagasc is selling off so much property while being extremely generous in terms of the 675 hectares of land it is renting at a cost of €340,000 per annum and having a milk quota of 1.5 million gallons? Would the ordinary small farmer be enamoured by this figure? Is it necessary to have so much land? Would research not be far more focused on smaller land holdings? Why would Teagasc have a milk quota of 1.5 million gallons when so many small farmers and young farmers, in particular, are yearning to try to increase their small quotas of 25,000 gallons on which they must try to survive?

Mr. Flanagan

About two thirds of the quota relates to Teagasc research activity. About one third relates to the dairy herds in the colleges. We have dairy herds in Ballyhaise, Clonakilty, Mellowes College and Kildalton which are used as part of the teaching function. The students who do courses in agriculture have to be taught the skills of dairying in a practical way. Therefore, we have a quota of about 100,000 gallons which reflects a good commercial farm at each of the colleges and is used to train students. In very round figures, it accounts for one third of the quota. The remaining two thirds is largely related to the farms we have in the vicinity of Moorepark plus some of the associated farms we mentioned in Ballinamore, Killmaley and Solohead, which was purchased, and Johnstown Castle used for environmental research.

The board of Teagasc believes the research done in these dairy farms contributes very much to the knowledge base which is used and very much valued by farmers. Teagasc does not have any quota or carry out any farming activities for the sake of farming. It is all done as part of a research programme which provides knowledge and information for farmers. The board believes this research is valued by the farming community and that the farmers in general do not believe this is excessive in any way because it generates useful information for their benefit at considerable cost indirectly to the State.

Teagasc has made a few proposals to reduce its activity in farming and its quota. If we sell the centre in Ballinamore, as we plan to do, it will be sold with quota which will be returned to the farming community. However, when we make that proposal, there is a lot of resistance. If we propose that we close another centre and reduce the size of research activity, there will, I suspect, be resistance and people will tell us we should not be doing this. The Teagasc authority has directed management to look at all of its dairying activity, look at the use we make of the quota and make a report to it on whether we could reduce the number of cows we have, the amount of quota we use and release some of it back. We are looking at this in terms of a report that will be forwarded to the authority in the very near future.

What is Teagasc's total stock holding? If we knew this, we could relate it to the level of quota it has.

Mr. Flanagan

We have about 1,400 cows across all farms. In the research farms controlled from Moorepark we have slightly more than 800 cows. In the other centres, mainly the colleges, we would have about 600 cows, making a total of 1,400. This relates to the total quota of 1,503,000 gallons which is slightly more than 1,000 gallons per cow.

I welcome the representatives from Teagasc and the Department of Agriculture and Food. As a practising farmer, I have a huge interest in Teagasc which I compliment on its work during the years. I always said it was the great cylinder that fired up the agriculture industry.

I must preface my remarks by saying the cut in the Estimates last November by the Minister for Finance has resulted in us being here today. It clearly indicated a lack of confidence in the future of Irish agriculture. I strongly object to some of the things Teagasc has done which I will clarify. Were it not for the savage and swingeing cut imposed on the organisation, it would not today be in a tailspin, from which it will not emerge. This brings us back to the national question of what we think of the agriculture industry. If the great cylinder, as I described it, is weakened, it will have the impact of weakening the industry.

I want to refer to the headquarters and the lease-back but will not dwell on it as the matter has been well covered by other speakers. Farmers and Teagasc staff in places such as Ballinamore, County Leitrim and Mellowes College, Athenry are taking the most severe cuts imaginable - for entirely wrong reasons. If it transpires that Teagasc headquarters staff creep back into the Sandymount Avenue premises after the sale is completed and remain there, under whatever conditions, thus frustrating the decentralisation process - as my colleagues said, 90% of the staff do not appear to be ecstatic about the move, to put it bluntly - Mr. Flanagan will find it very difficult to explain that situation against a background in which small communities are being dispersed as a result of decisions by Teagasc.

In a situation of this nature, the pain must be seen to be shared. Very few of those concerned at local Teagasc centres believe any real pain will be endured at the top of the organisation. I am just putting down a marker in this regard. I have no idea what Mr. Flanagan is going to do - at this stage I am not sure he actually knows what will eventually happen. I emphasise again that if the people affected by closures and cut-backs at local centres find that headquarters has not been affected to any real extent, opposition to the plan will intensify even further.

Has a price been agreed at this stage for the headquarters premises? Has it actually been sold and, if so, what price was obtained for it?

Mr. Flanagan

It is not true that headquarters has been sold. The price is still very much within the confidentiality range of the tendering process. Teagasc headquarters is being sold by public tender. There is a process whereby the Teagasc authority has to agree to sell at a tender amount, following which we will require the purchaser to make a deposit which reflects a percentage of the tender amount. This is in progress. Until the required deposit is paid and the formal offer is made to sell the premises, the confidentiality of the tendering process has to be maintained. All going well, in a few days time, the tender price and the identity of the purchaser will probably enter the public domain after Teagasc and the purchaser have signed an agreement to do business. This has not yet happened.

The dogs in the street appear have a figure of €9 million in mind.

Mr. Flanagan

No. The figure, according to the dogs in the street, was €10 million or €12 million.

Is it the intention that the savage cut in the Estimates will be offset by the sale of Teagasc headquarters?

Mr. Flanagan

The sale of headquarters will yield whatever amount the market is willing to pay. The purpose for which Teagasc will use that money will require the approval of two Departments. That remains to be determined.

I sincerely hope Teagasc is not in line for another cut. At least, the proceeds of disposal of such an asset should be put back into the organisation. Are you suggesting that might not happen?

Mr. Flanagan

I do not know. All I know is that we have to get the approval of two Departments as to what we can do with such money. We have yet to receive it.

I will turn to more specific items. The Teagasc board and management have gone through the west like a dose of salts. In the areas affected it has further weakened the weakest province with the weakest farming infrastructure. In relation to Ballinamore, with which I am very familiar, Mr. Flanagan stated the research part of the centre was being transferred to the centre in Ballyhaise, which I have also visited on many occasions. There is a substantial difference between the land in Ballinamore and that in Ballyhaise.

In effect, Teagasc is expressing a vote of no confidence in thousands of small farmers throughout the north-west who have to do battle with the problems of wet land every day of their lives. From Mr. Flanagan's professional background, he will be very familiar with the technical issues involved in this regard. For the first time in the history of Teagasc and its predecessor, ACOT, there will no longer be any practical research on the wet land of Ireland, from which many farmers still have to eke out a living. That is my very serious concern with regard to the closure of the centre in Ballinamore. While its name may never have made the headlines in the same manner as that in Moorepark, for example, its work was very relevant to many farmers, full-time and part-time, who have to endure the problems of farming on substandard wet soil, yet, as its first response to financial pressure, Teagasc has turned its back on them which is highly unfair and a step in the wrong direction.

The decision taken by Teagasc in relation to Mellowes College, Athenry, is even more drastic. I attended the official launch of the organic farming section at the centre a few years ago. Organic farming has an important role to play. There was a great fanfare on that occasion. It was presented as an opportunity, in the excellent soil structure of Athenry, to promote the development of organic farming, in which consumers have a great interest and which can provide a living for farmers. It required enormous effort and investment to transform that farm from commercial to organic status. Time does not permit me to detail the various steps involved but Mr. Flanagan knows precisely what I am referring to. However, just half way through that development, the axe has been brought down on it. While it may still be an "organic farm", the entire educational aspect is being transferred to Mountbellew Agricultural College. I fail to understand how one can divorce the production of organic produce from the educational aspects of the process. Suddenly, as in the case of small wetland farmers, the message from Teagasc to organic farmers is that the activity will continue to some extent but, in a sense, under protest.

Teagasc has dealt another blow to County Leitrim: I understand its advisory service office in Manorhamilton has been axed, just like the office in Loughrea. Will Mr. Flanagan comment on the rationale behind the action of Teagasc in the areas to which I have referred?

Mr. Flanagan

I will endeavour to reply. There was widespread publicity about the situation in Athenry on the basis that we were closing the organic farming unit, having invested substantially in it. That was never a decision of Teagasc, nor was it ever our intention. The development of the unit, including dairy, suckler cow and sheep units, is going ahead. In addition to these well developed organic units, we are adding a research facility to the demonstration aspect and its use for short courses.

Where will the courses be held?

Mr. Flanagan

We made one definite decision in relation to the centre in Athenry. Two or three years ago, when Teagasc was supporting some 14 or 15 agricultural colleges, reports indicated that, with the declining number of farmers and declining interest on the part of young people in returning to farming, the number of agricultural colleges had to be reduced. Teagasc examined the colleges, including those at Athenry and Mountbellew which were 20 miles apart, and decided that there was no need for two residential colleges, with their associated overheads, so close together. Three of the four colleges in the north-east - St. Patrick's, Warrenstown and Multyfarnham - have now closed and we are left with that in Ballyhaise. Three years ago Teagasc could not justify having two residential colleges, with insurance and other costs, 20 miles apart. It decided to support the college at Mountbellew as a residential college and close the facility at Athenry. The decision was not fully implemented at the time but Teagasc decided recently to close the residential aspect. This meant that there would no longer be a matron and several other members of staff involved in the provision of residential accommodation for young people.

Teagasc plans to retain courses, including adult courses in organic farming and other short courses, that do not involve the provision of residential accommodation for students between the ages of 17 and 20 years, approximately. If a course in organic farming is found to be justified, the students will be based at Mountbellew, rather than Athenry. They will be allowed to use the facilities at Athenry, as necessary. It is only 20 miles away, a short distance in today's terms. The change we made at Athenry was quite small. The decision to close down the residential element was taken two years previously. We have built up the facility at Athenry, for example, by deciding to locate the rural economy research centre there. This means there will be a net increase of about 20 staff.

That is if they come.

Mr. Flanagan

I will respond to the Deputy's second question. The board of Teagasc is fully committed to implementing decentralisation to the new centres. There are various ways in which this can be achieved over time. The board has been adamant in saying it has no intention of forcing staff to relocate. Those who wish to stay in Dublin will be redeployed in other jobs over time. The plan to relocate Teagasc's headquarters to Carlow and the rural economy research centre to the west will happen as quickly as we can achieve it, through the existing means available to us. We do not intend to leave staff in the current headquarters. Teagasc is well aware that the pain must be shared. The staff at headquarters believe they are being asked to take more pain than anyone else. People down the country may believe those at headquarters must share the pain but those at headquarters believe they have been allocated an undue share. The 100 staff at headquarters affected by these decisions comprise the biggest group, by far, of those affected.

The board of Teagasc is insistent that the relocation will be achieved by various means over a reasonable period. Management is confident in this regard. The accumulated experience of decentralisation from Dublin has taught us how best to arrange such a process and given us an idea of the timespan involved. Experience shows that it can and will happen if those involved commit to making it happen. The view of the Teagasc authority is very definitely that the relocation from Dublin should happen and it will.

The staff at headquarters are reluctant to relocate. Some 90% have not shown any clear desire for decentralisation. I want to make it clear that the facilities at Ballinamore, Manorhamilton, Loughrea and elsewhere will close and that the changes at Athenry will happen. The real crux of this matter is that the facilities will close much quicker than headquarters. There will almost be an uprising if these measures are not taken in a balanced way.

Let me mention the remarkable decision taken in relation to the facility at Knockbeg, County Carlow. The service provided for sheep farmers is renowned, not only in Ireland but also in other countries. Will Mr. Flanagan indicate to the committee the rationale behind the decision to close this facility? While there is always a cost on demonstration and research farms, I understood the farm in question was either breaking even or making money. Can Mr. Flanagan give me some indication of the research and economic factors which led to the Knockbeg facility being identified for closure?

Mr. Flanagan

When one has reduced resources, one has to become smaller and some places have to be closed. Teagasc's broad rationale is that one needs to concentrate one's research in fewer, larger centres. The research being carried out at the Knockbeg facility, which was being run almost as a commercial farm, was very applied. The farm generates income from its farming activity. When people mention that the facility was making money, they are looking narrowly at the farming activity only. If one considers the costs of the labourer and the sheep activity only, one might be making money. If one includes the costs of the research staff in charge of the facility, the research technicians, insurance and other Teagasc overheads, it is clear that the facility is far from making money. The net annual cost to Teagasc is about €100,000.

The view of Teagasc was that it could make use of the Athenry facility, as well as monitor farms. It planned to conduct research on monitor farms of a similar nature to the systems research conducted at Knockbeg. The monitor farms research could provide information of a similar nature to that from the facility at Knockbeg. We had to close something and decided that the existing flow of information to farmers could be maintained and the existing staff numbers and places reduced. Every time one has a place, one has a cost centre. A cost centre includes insurance, staff and overheads. If we do not have fewer centres, we will be unable to reduce costs.

On a related point, how many research scientists are employed by Teagasc? You are talking about cutting costs. What are the costs of employing the scientists?

Mr. Flanagan

Research services are delivered by about 200 scientists in nine main research centres.

What is the average cost of each one?

Mr. Flanagan

I will ask my colleague, Mr. Bates, to provide information in that regard.

Mr. Bates

A senior researcher earns about €80,000 per annum.

Is that figure gross or net?

Mr. Bates

It is gross but it is charged to Teagasc. We also pay his or her tax. To which station did the Chairman's question on staff numbers refer?

I want to know the number of research scientists employed nationally and the number of local advisers Teagasc employs. Proposals have been made on rationalisation and cutbacks. I want to know precisely where these will take place. Deputy Connaughton mentioned savings of €100,000, while Mr. Flanagan mentioned stacked up costs which included insurance and so forth. Having listened to the witnesses for the past ten to 15 minutes, it is possible to cherry-pick with regard to costs, which is the reason I want to get to the core of staff costs and the numbers of local advisers and teachers employed by Teagasc.

Mr. Bates

The best way to answer your questions is to make a submission to the committee as I would be guessing otherwise.

Mr. Flanagan outlined the justification for cutting back and setting a precedent by selling off assets, effectively to pay debts. We have not heard the core costs in terms of teaching costs and staff numbers.

This is the first time I have heard the cost of the facility at Knockbeg is €100,000, which is not much more than the cost of employing one scientist.

That is my point.

God knows what the cost would be in Ballinamore. It certainly would be lower. Our point is that Teagasc is killing the wrong goose.

If we are to receive a written response to the questions put to Mr. Bates, I ask that it include the latest figures for the numbers of farm advisers employed by Teagasc. A good reference point for analysing them would be the comparable figures for now and ten years ago, given that the number of active farmers has changed over that period. These figures would allow us to make a comparison between the number of active farmers now and ten years ago. If we are seeking value for money, we need to examine this area.

On the issue of research via monitor farms, I support research. It is vital we continue to have independent research for which Teagasc has been renowned. It has been one of the organisation's great assets during the years. I am concerned about the role of the corps of scientists employed by Teagasc, particularly given its age profile. Without actually saying so, a new spin is being put on the future of the organisation and I fear information will be passed on to farmers via the monitor farms. While I have no problem with this concept, it must, from a research point of view, be accompanied by in-depth research, from which, I think, Teagasc is now moving away.

Mr. Flanagan

I have the figures for the facility at Knockbeg. Pay costs in 2002 were about €90,000; non-pay costs, €99,000; income from sales, €56,000 and net costs, about €125,000.

Even €125,000 is a minimal amount compared to overall expenditure. As soon as sheep farmers become aware of these figures, they will be up in arms about what Teagasc has just done.

Mr. Flanagan

Teagasc has a significant sheep research programme based in Athenry where we conduct basic research in support of the sheep industry. Combined with information from monitor farms, this meets the needs of the sheep farming community reasonably well. If we had more resources, we could carry out much more research.

How much did Teagasc spend in 2002 on travel and subsistence?

Mr. Flanagan

The travel and subsistence budget is of the order of €6 million.

What other accruals does the organisation have related to staff benefits?

Mr. Flanagan

What do you mean by the word "accruals"?

I mean additional privileges for staff such as travel and subsistence paid in addition to gross salary. I feel very strongly on this issue because it relates to the prudent management of the voted Estimate and we are now discussing cutbacks which will affect the most vulnerable in society. As Deputy Connaughton stated, they will affect peripheral regions where Teagasc services are most needed. From my inquiries, it appears the organisation employs 550 local advisers, as many as 200 teachers and more than 200 scientists, which amounts to nearly 1,000 highly paid, highly skilled employees earning significant salaries, yet we are discussing cuts to peripheral aspects of a significant budget.

Mr. Flanagan appeared to indicate that environmental protection was an area in which Teagasc was increasingly involved, more for reasons of public good than potential profit. I find this statement difficult to square with Teagasc's decision on Mellowes College. I refer to the section of the 2001 report which, I presume, was published in 2002, dealing with the college. The report noted that it had been designated by Teagasc as the national organic training and development centre. Utilising the training facilities and the organic milk and meat production systems being developed, the college would, it stated, provide a vocational certificate course and adult introductory and updating courses for existing and new organic producers and for those interested in careers in the organic sector. This directly contradicts what Mr. Flanagan has just said in relation to the future of the college, its current facilities and how Teagasc intends to share these facilities in Mountbellew.

It is possible this decision was forced on Teagasc as a result of departmental Estimates. If that is the case, the board of Teagasc has been guilty of dangerous short-term thinking by making the most immediate cuts without thinking through their long-term impact. The contributions of other Deputies, particularly in relation to closures, notably in Ballinamore, indicate that Teagasc took a similar approach there. In other words, the decision to close was taken because the centre in Ballinamore conducts research on a soil type that constitutes perhaps 15% of land being farmed in the country.

Is the research budget allocated between livestock, tillage and horticulture in roughly the same proportions as these types of farming are carried out in the agriculture industry? Does the geographic spread of Teagasc justify its position as a national organisation? The decisions it has taken on foot of its cutbacks indicate that a retreat into a shell is envisaged by which it will focus on conventional farming, namely, traditional livestock farming, as opposed to tillage and horticulture. The organisation is confined geographically in that it is concentrating on agriculture on the most productive land at the expense of the type of support and research for which I understood it was established.

Mr. Flanagan

Teagasc has tried to spread the decisions it took in 2002 to cope with the reduction in the money available to it. A decision was made in 2001 that if there was sufficient demand, Teagasc would offer a vocational certificate course in organic farming in Athenry. That decision predated the reduction in funding in 2002. The subsequent decision not to provide a residential course in Athenry was taken in the context of coping with reduced funding.

A decision was taken to close and sell three small research centres - Clonroche, County Wexford, in the south east; Lullymore in the centre of the country and Ballinamore in the west. This reflects an equal share of the pain across the country. It was not a case of picking a particular geographic area.

Was it on the basis of poor land quality?

Mr. Flanagan

Various criteria were used by Teagasc to decide what proportion of its resources should be allocated for research in the various sectors of agriculture and food. The importance of a particular sector to the national economy is one of the main factors. A great deal of money goes into research on dairy and beef production, while a lesser amount goes into research on sheep and pig production. This broadly reflects the importance of these sectors to the national economy. Potential for development in a sector is another deciding factor. In this way a small sector could gain investment beyond its contribution to the national economy. Well developed sectors doing well may not gain research funding proportionate to their size.

That approach seems to be short-term. The sectors to which you referred are already heavily subsidised at European Union level because of the Common Agricultural Policy. Based on recent decisions on the allocation of resources, it appears Teagasc has given up on innovation. It seems to want to maintain the status quo at the expense of future development and the identification of areas that would better bring about added value.

Mr. Flanagan

In some respects there is an element of crystal ball gazing in our current review. Current investment in research will dictate what will happen in the future. We have to look at what will happen post-CAP reform and post-WTO negotiations. In the dairy sector, for example, we need to look at the research required to make Ireland competitive in a much more open market. We do not plan for a sector constrained by quotas. We have to consider its operation in the context of a free trading world market. In our current planning we have to try to predict what the situation will be in ten years' time and provide accordingly. It is pointless to invest in constrained production research in dairying which is history. We had not been planning for a situation in which there was a cap on production but that is what has happened.

I wish to return to a theme to which other members have referred - the intention of Teagasc to sell assets in which money has recently been invested. I believe the centre in Ballinamore received €100,000 for upgrading in 2001 alone. Potential administration and residential space owned by Teagasc will be sold. Teagasc will need to become more involved in the renting and leasing of facilities. This might provide some current expenditure leeway in the coming years but in the long-term I consider it to be bad policy.

Mr. Flanagan

I do not see a big difference between owning and renting or leasing. In one, capital is tied up and in the other, it is not.

That is not the case when one takes the recent investment into account. What is the benefit of investing in an asset, selling it and then renting?

Mr. Flanagan

Improvements have been made on the Ballinamore farm. We plan to sell it as a going concern with a quota and expect there will be a return from the investment in the sale price. The market——

I would not be too confident about that.

Mr. Flanagan

That is how the free market works and we follow free market forces. With regard to County Leitrim, we were criticised for trying to close the centre in Manorhamilton. Teagasc has maintained four headquarters locations in the county in which we have four advisers. There is a proposal that we——

I believe the office accommodation is located on the first floor and not user-friendly. Is that correct?

Mr. Flanagan

To which centre are you referring?

The temporary office accommodation used in County Leitrim.

Mr. Flanagan

Teagasc owns a building in Manorhamilton, one of four centres. We also have a centre in Ballinamore, a rented facility in Carrick-on-Shannon and a centre in Mohill. There is no adviser in Manorhamilton and one in Ballinamore. The chief executive officer is based in Carrick-on-Shannon and there are two advisers in Mohill. In terms of providing support and facilities for staff, the minimum requirement is probably that there be four or five people in an office. In staffing terms, one centre is justified in County Leitrim, rather than four. We are trying to rationalise. I make no apologies for trying to improve the position in the county. Even though we were forced to reduce the number of staff, we are examining the possibility of increasing the number of advisers by one or two, through prioritisation, as the best contribution to the advisory service in the county. We cannot justify keeping four or five centres open when we have only four or five advisers in the county as a whole.

I disagree. We are talking about a research facility in which there has been considerable State investment, one which was highly recommended last year by the Teagasc board as an integral part of its research facilities. When was the five year plan published?

Mr. Flanagan

We have rolling five year plans.

Are any of them implemented, or are they just shelf-warmers ?

Mr. Flanagan

In recent years we have had rolling five year plans. We publish such a plan every year——

The most recent five year plan clearly indicated the benefits of the Ballinamore research farm in the west.

Mr. Flanagan

It was included as one of the centres in the 2000 plan but would not have been singled out as being more or less worthy than any other.

It was described by Dr. Séamus Crosse on 26 March 2002 as an integral part of the overall regional research programme of Teagasc. What has changed in a year?

Mr. Flanagan

As Teagasc has less resources, it has to prioritise to keep open the more important centres and close the less important ones.

Dr. Crosse indicated and identified a year ago that it was an integral and beneficial part.

Mr. Flanagan

All activity forms an integral part of the programme.

I am curious to know the reason Moorepark Technology Limited exists as a seperate company if it is engaged in research and development, the raison d'être of Teagasc which owns 51% of the company. It seems that sales from the company to Teagasc and vice versa oscillate in a wide and varying way.

Mr. Donnelly

Moorepark Technology Limited was established for the purpose of assisting Teagasc to transfer technology to the food industry, an integral part of its mission. In order to do this, pilot plant facilities were needed which were neither available to Teagasc nor the food industry. Teagasc put a proposition to the industry that it was in its interests to invest in the development of Moorepark Technology Limited as a facility which would give it an opportunity to increase innovation and Teagasc an opportunity to transfer technology.

Moorepark Technology Limited is an efficient financial way to provide access to the public research programme to large-scale, sophisticated facilities. It is operated on a commercial basis because it is also an efficient financial way in which to pay for such facilities on an ongoing basis. The main purpose of Moorepark Technology Limited, once it secures financial stability, which it has done, is to discharge the mission of Teagasc in terms of development of the food industry, particularly in product and process innovation.

Are you saying sales between Moorepark Technology Limited and Teagasc and vice versa are incidental to the process? I ask this question because between 2000 and 2001 sales between Moorepark Technology Limited and Teagasc trebled whereas those between Teagasc and Moorepark Technology Limited almost halved.

Mr. Donnelly

Those figures capture a window in time. There is no particular change in the trend of sales between the two. Like every other user, Teagasc is a customer of the facility. When my research staff in the dairy products research centre need access to pilot plant, they are customers.

Surely Teagasc is the predominant customer if it accounts for almost one third of sales in the last year.

Mr. Donnelly

The figure is 25% which does not make it a predominant customer. A figure of 25% in one of the foremost dairy research centres internationally which has a large research programme represents a relatively small proportion of total business. The significant success of Moorepark Technology Limited is that the commercial world accounts for 75%. An integral part of the mission of Teagasc is to interact with the commercial world in transferring technology.

It sounds like a good deal that it holds 49% of the shareholding and has 75% of the benefit.

Mr. Donnelly

No. Teagasc is a customer. The deal in the first place was a good one for it because it did not provide capital for the facility. This was provided by the companies involved and through grant assistance. Internationally, Moorepark Technology Limited is unique as an extension of a public service institution in that it operates with a business plan and has a basis for refinancing over time. The alternative - this is what happens in this and other countries - is to provide a public institution and it becomes a millstone to operate and manage such a large facility. We have a business plan which is the envy of most pubic institutions throughout the world.

I have been trying to establish in my own mind whether the closures that have been the subject of much of the discussion arise from the influence of changing features of the CAP or farming in general or economic use of resources or whatever. Is the committee to conclude, from what you have said, that they are dictated by the reduction in Teagasc's budget?

Mr. Flanagan

The immediate factor that precipitated the proposals to close the centres in question was the reduction in the budget. The centres picked for closure are ones which Teagasc considers to make the smallest contribution. As farming activity decreased and the justification for investment in research reduced, these are the ones one would consider closing in the normal course of how organisations evolve.

I should have stopped you and put a comma after you agreed that it was driven by the budget. I thought that, unlike Clonroche or Lullymore, there was a particular requirement in Ballinamore, given the soil type in that area of the west, for maintaining the facility in County Leitrim. Was I wrong?

Mr. Flanagan

The view of Teagasc is and has been for some time that the contribution of the centre in Ballinamore to the knowledge base about dairy farming has not been sufficient to justify keeping it open.

How many altogether will be made redundant?

Mr. Flanagan

I do not know how many will be made redundant. Current policy in Teagasc is not to make any person redundant. Some five people are working in Ballinamore and all five will be offered redeployment in another position appropriate to their training and as close as possible to Ballinamore.

Have there been consultations or discussions with the staff's union?

Mr. Flanagan

There have been meetings with the trade union and staff involved.

What facilities were moved off site at Abbottstown?

Mr. Flanagan

The centre at Abbottstown has nothing to do with Teagasc.

Was there no Teagasc facility in Abbottstown?

Mr. Flanagan

No.

Can I ask the representatives of the Department of Agriculture and Food what facilities were moved off site at Abbottstown in regard to the agricultural sector?

Mr. Beecher

While I am not an expert, I will endeavour to answer the Deputy's question as best I can. Abbottstown is a large farm and centre supported by a large complex of laboratories. As far as I am aware, the laboratories are still functioning and a new complex, to include the State Laboratory, is being built at Backweston, near Lucan. Therefore, it will be some time next year before staff will transfer from the laboratories. Farm activity at Abbottstown has been drastically reduced. Only a certain amount of the land has been transferred for the new project, including the swimming pool and so on. Most of it has not yet been transferred. Therefore, very little has changed.

In terms of laboratory facilities, what is the line of authority? Who is ultimately responsible? Is it the Department directly?

Mr. Beecher

Yes. The Department has a seed laboratory, a meat laboratory, a pesticide laboratory and one or two others. The State Laboratory is also located there but it answers to the Minister for Finance. That is the line. Our Secretary General has direct responsibility for the four or five laboratories we have located there. The farm was used to back up the keeping of animals for the veterinary section. It was also used as a sort of quarantine station for animals that might have been——

A new building was built there a few years ago.

Mr. Beecher

Yes, some of the laboratories were improved.

They will all be transferred to Backweston.

Mr. Beecher

An integrated laboratory complex is being planned for Backweston Farm, near Lucan, where the Department of Agriculture and Food already has a research farm. This will now become primarily a laboratory centre to where the State Laboratory is to be relocated.

As a matter of curiosity, why is the Department directly responsible? Why is it not Teagasc?

Mr. Beecher

I presume there is an historical reason.

Mr. Donnelly has given us a perfectly credible explanation for the existence of Moorepark Technology Limited and so on. I am curious about the reason it relates directly to the Department.

Mr. Beecher

The laboratories located there are primarily control laboratories - enforcement support laboratories. While they are sometimes called research laboratories, their function is not research but control. They support animal disease control, the control of residues and so on. Therefore, they are not, strictly speaking, involved in research, development and innovation.

How many people are located there?

Mr. Beecher

Probably 300, although I am only guessing.

Of course. We are not going into too much detail.

Mr. Beecher

It is in the hundreds, not the thousands - somewhere between 200 and 300.

Have any of them actually been transferred yet?

Mr. Beecher

Not that I am aware of.

But all of them will be.

Mr. Beecher

Yes. All of the laboratories are to be moved on a phased basis. The State Laboratory will function in the new centre from 2005.

Does the Department then intend to vest the land in Campus Stadium Ireland?

Mr. Beecher

That was the original plan. I am not aware of any——

It is still under the aegis of the Department of Agriculture and Food.

Mr. Beecher

A certain proportion of the land - as far as I am aware, less than 10% - has already been vested in the management company for the complex, whatever it is. That includes the swimming pool.

Roughly how much did it cost to acquire the lands at Backweston?

Mr. Beecher

Backweston land has been in the ownership of the Department for years and years. Therefore, it did not cost anything. Technically, there was no cost.

It was in the Department's ownership for years. What was it doing with it?

Mr. Beecher

We had a cereals research centre there and carried out trials of cereals and crops. Some animals were also grazed there as part of a rotation. However, some of this was stopped and planning permission obtained for the laboratories, which are at an advanced stage of development.

Mr. Beecher

I am sorry if I did not have all the answers the Deputy wanted but I was only working off the top of my head.

We will have another opportunity to talk to the Secretary General of your Department.

I have a few questions for Mr. Flanagan but as I am a Dub, he need not worry too much - they will be easy enough. Listening to the conversation this afternoon I noticed that there was a lot of concern about areas in which cuts may or may not be made and the rationalisation of the service. The figures were hard to get at; various members asked how many staff were scientists, how many were advisers and so on. With the number of centres in existence as well as what will now evolve as monitor farms, all of that factual information would be useful from our point of view in order that we can investigate how the service has changed as the total numbers of farmers and so on have changed.

As it would be unfair of us to spend the whole meeting considering the micro-detail of various individual centres, I have one or two general questions about Teagasc from a national point of view. Teagasc does a good deal of pure research on production systems for both milk and beef. What is the potential for this research to ease the burden of the severe cuts being proposed by the European Commission under CAP reform?

Mr. Flanagan

One of the areas in which Teagasc has been doing research is that of predicting the effects over time on farming of the current proposals for the reform of the CAP and the proposals of the European Union relating to the World Trade Organisation discussions. The model being used, FAPRI, was developed in Ireland, although it originally came from the USA. Teagasc has developed considerable expertise in this area and used this model to show the effects on different sectors over a period of time if the current proposals are agreed to. As the Deputy is probably aware, the farming sector did not like the answer. Therefore, it was inclined to criticise the methodology but Teagasc is confident that it used the best economic principles to make a reasonable prediction of what might happen. However, the proposals are being modified this week. Therefore, the actual result might be different. Teagasc uses models to predict the effects of proposals for policy change.

Teagasc also tries to predict what will happen in farming in the future through production research. For example, it has a research programme which aims to reduce the cost of dairy production and improve the quality of milk in order that farmers will be in a position to compete in the world market. Similarly, it tries to develop systems of beef production which give consistent quality but also utilise grass to the maximum in order that the Irish industry will be able to compete in a much more open world market.

Teagasc also has a research programme that considers what is needed in rural communities to adjust to the CAP changes, in particular the scenario in which there is a much smaller number of large commercial farmers but many part-time farmers and rural dwellers. Its research aims to find out what is needed to support the rural community and help it adapt to changing circumstances.

I thank you for that information, because often when people refer to Teagasc, the impression is given that the research is purely scientific but it seems it is more than this.

At certain times of the year one hears of rivers and lakes being polluted and so forth. What is the role of Teagasc in this? How can it help farmers, particularly in relation to the increased use of fertilisers and other possible sources of pollution?

Mr. Flanagan

Teagasc is engaged in three main activities - research, advisory services and training. In all three it is concerned with sustainable production and protection of the environment. For example, our research programme concentrates strongly on what happens to the nutrients used as organic or mineral fertiliser on farms, particularly phosphorous and nitrogen. Phosphorous use was the subject of significant research which indicated that in the last ten years farmers were using too much, leading to leakage into ground and surface water. There was a strong recommendation that phosphorous use should decrease, which advice, by and large, has been taken on board by farmers. The figure is now about 30% lower than it was ten years ago and much more in balance with the needs of plants. The idea is that one puts on as much fertiliser as crops, plants and animals will take off with the result that there is no build-up of nutrients that leak into the environment. If the research sector states less phosphorous is desirable for many reasons, including economics, the advisory sector gets the message out to farmers. It is included in the training programme for young and adult farmers.

On point sources of pollution, Teagasc provides advice and training in the safe storage of farmyard waste and impresses on farmers the need to ensure they do not risk an accident that would cause a fish kill or pollution of groundwater. There is a strong programme in place to advise farmers on good practices in dealing with such waste and the need to avoid pollution of any kind.

What was the cost of maintenance and repairs in 2002? Does Teagasc have its own maintenance section?

Mr. Bates

Maintenance and repairs cost €6.8 million. We have centres all over the country and a small building maintenance group which comprises three persons, including engineers. While some of the maintenance work is done by them, it is mainly done by outside contractors.

The figure is €6.8 million for one year.

Mr. Bates

For repairs and maintenance.

Is that 2001 or 2002?

Mr. Bates

In 2001.

Mr. Purcell

I am familiar with this because we are about to finalise the audit. The figure for 2002 is around €8 million.

That is the overall maintenance bill for the Teagasc property portfolio.

Mr. Bates

Yes.

Is the veterinary centre in Grange, County Meath, the responsibility of Teagasc?

Mr. Bates

No.

Mr. Flanagan

There is an EU veterinary and food centre in Grange built on land given by Teagasc but it has nothing to do with it.

Was there any payment for the site?

Mr. Flanagan

The Government of the day decided there should be no payment to Teagasc.

For the site.

Mr. Flanagan

Yes.

In the national interest, I am told. Will the delegation provide the committee with a breakdown of the capital programme of investment by Teagasc in agricultural education in 2001 and 2002?

Mr. Bates

In 2001 in our capital programme we spent £4 million or €5.08 million on training.

Insurance claims in respect of Moorepark Technology Limited amounted to €36,000 in 2001 and €38,000 in 2000. The insurance premium increased by 50% in 2001. What was the reason for this?

Mr. Donnelly

Ostensibly, the insurance company makes no connection between claims and premiums. We note that premiums for all businesses escalated greatly in the two years in question. The board considers it extremely fortunate our premium increased by only 50%. We hope it remains like this.

I thank the witnesses from Teagasc and Moorepark Technology Limited, departmental officials and the Comptroller and Auditor General and his team. Is it agreed that the accounts should be noted? Agreed.

The next meeting will take place at 11 a.m. on Thursday, 26 June 2003, when we will deal with Vote 9 - Office of the Minister for Justice, Equality and Law Reform, Vote 20 - An Garda Síochána, Vote 21 - Office of the President, Vote 23 - the Land Registry and Registry of Deeds as well as special report No. 5 on the Garda interview recording system and a value for money examination of the purchase of tyres by the Garda (resumed).

The witnesses withdrew.

The committee adjourned at 1.30 p.m. until11 a.m. on Thursday, 26 June 2003.